tv Bloomberg West Bloomberg January 2, 2014 11:00pm-12:01am EST
♪ >> live from pier three in san francisco, welcome to the late edition of bloomberg west where we cover the technology and media companies that are reshaping our world. our focus is on innovation, technology, and the future of business. let's get straight to the rundown. to facebook users file a lawsuit against the social network saying it's scanning private messages to better target advertising. facebook calls the lawsuit without merit. hackers expose the names and numbers of millions of snap chap users after a security form says it's warned him about von ability.
will it be lights out for major nfl playoffs this weekend? three games are in danger of a blackout unless the stadium's sellout in time. first, to the lead -- facebook hit with a privacy lawsuit. two users complain facebook scanned some private user messages and then profits off the data by sharing it with advertisers. the plaintiffs are seeking class-action status and say it violates federal and california law. facebook says the allegations are without merit. facebook is not the first company to face these kinds of allegations. google and yahoo! face allegations of intercepting user communications. our bloomberg contributing editor joins us now from new york. a sickly, what is facebook accused of doing? how did this allegedly work? >> what they are accused of doing is looking at the links of
right messages people are sending to one another and scanning the content of the messages and inappropriately profiting off the data they gather that way. i don't know how terrible that would be and i don't think it is outside the realm of the way they normally operate. it does not strike me as a very big deal, though there may be something to it i'm not aware of. >> how is it any different from google showing the ads based on what is in my gmail? >> it doesn't seem that the friend to me. facebook is group you less about trying to stick to the policies about respecting the privacy of its users. on the other hand, data is its straw -- is its stock in trade great i'm sure it does observe websites they link to outside the service so they can do things like sell an ad to somebody and say here are 500 people who have been to the
website of watching raking bad. but that sort of thing is not the same as saying here is emily chang. she sent a note to her friend -- they are not going to tell any outsider that kind of thing. >> on the other hand, facebook time and again is running into these privacy challenges. is this something serious? could this hurt facebook's reputation? is this just another privacy complaint? >> i don't think this particular complaint is going to change anyone's momentum. i think facebook always has to be fed -- always has to be bending over backwards to ensure its users are confident that it takes their privacy seriously. it does always say it aggregates user data and sells ads against that so that they can sell ads that can be targeted to categories of users. but the minute they start
letting anybody know what any individual user of facebook does other than the friends of that person, or the people whom they have allowed to follow them, they have a serious problem and it would slow their momentum. i frankly think that is unlikely. most of the so-called privacy complaints and disputes and mistakes facebook has made have generally been in errors that they try to correct. they have occasionally made mistakes and how they describe things, but i think they have been quite good at sticking to their policy of respect to the privacy data other users. but if you are friends with someone on facebook, you are trusting them with your data. it is the big privacy problem most facebook users have. they have too many friends they don't really know. >> we will continue to see how all of this plays out great david kirkpatrick, you will be with us later in the show. we turned to another social
media star in hot water with users. hackers say they stole 4.6 million user names and phone numbers from a snap chat database. the information was published on reddit. this after gibson security said they warned snap chat about the security vulnerabilities. we reached out to snap chat and have not heard back. this is the latest in a string of attacks. skype boss put her account was hacked by a group claiming to be the serious electronic army and then there was the breach of target's security. i guessed -- my guests are joining me to talk about security. you used to work at mozilla and render security operation, so these are things you are familiar with. how big a flaw was there to make something like this happen? >> at the root of what snap
chat, the problem they have is a way of coding with their application that was exposed to the public which they didn't intend to have people accessing. this was reported to them in august. developing software can develop in flaws. when they tell you about those flaws, you need to act quickly to take action. >> why wouldn't they respond quickly? >> in the start up, you see a battle between new features and acquiring features. in companies writing themselves on protecting users privacy, they need to take those things very, very -- act very quickly. >> it seems like more of these things are happening lately. on a scale of one to 10, how bad is what happened with snap chat compared to some of the other things we have seen happen with users accounts and personal information? >> it's bad on a couple of
levels. one is they are exposing phone numbers of users and hackers say they are going to put the full number up in some locations. the data people are drawing has a number but it is secure. changing your phone number is a big deal. i can change my password relatively easy. if i have to change my phone number or worry my phone number or something that might have been enlisted is now public, that the ready big deal. especially the fact that you now have security companies saying we told them not once but twice that this was a problem. we did so relatively discreetly in august and explicitly more recently and they did not react to it. if i were a user, that looks pretty bad. >> snap chat says they have certain protections in place tom about it wasn't enough to prevent something like this. how did this compare to something like facebook or
twitter? would this happen with facebook or twitter? >> what we saw is gibson security did an analysis of the security in place and said they are inadequate. >> how so? >> they are trying to rate limit the attackers so if they perform many operations in a short time. say you go with a thousand friends, that should be blocked as suspicious. with this happen to facebook? what attackers are now doing is instead of launching an attack from one computer 1000 times, they use a bot and launch it from 1000 computers one time. they have the same effect for the attackers and it makes it very difficult. we will see this growing not only in companies like snap chat, but more established companies like facebook. facebook already faces these kinds of threats. >> is this like eight mile of service attack western mark >>
it is similar in the sense they are using a. net. -- using a bot net and letting them do their malicious bidding for them. it's hard to block all those attackers when you can't tell them from humans or bots. >> you think we will see more of these kinds of attacks this year? >> i think we will see a rise in it. social media that -- social media websites will be in an attack and commerce websites are going after user profiles and banks as well. >> they will definitely face these kinds of attacks. it's a growth in this kind of style. >> big news in the security world, fire i announced under the radar security firm of more than a billion dollar acquisition.
>> it was obviously a pretty plum acquisition that has a lot of attention because it specializes in cyber espionage from nationstates like china. they got a lot of attention when they responded to attacks like on the new york times. their ipo did really well and it did enough to create this acquisition but a link between this company that has a product and a company that does a lot of very sophisticated response is pretty powerful. the stock went way up. it's a good acquisition for them. >> thank you so much for joining us here today on "bloomberg west." college football's biggest game is just a few days away but who stands to be the biggest winner?
>> welcome back. the nfl playoffs kick off this weekend that fans in three of the four cities hosting the games may not get to see them. that's because the games in reading bay, indianapolis and cincinnati are on the verge of being blacked out on local television unless they sell out in the next 24 hours. this comes as more people forgo the stadium experience in exchange for watching games on television and mobile devices. fox said it average more than 21 million viewers for the just concluded nfl regular season, it's most-watched season ever. turning to college football, the ncaa will crown a champion when the auburn tigers take on florida state. it will pull in big ratings for espn but who really wins during the college bowl season question
mark i'm joined by jon erlichman and my former boss at espn. my household is reeling from stanford losing in the rose bowl yesterday. but that aside, who really wins off the bowl games? is it the networks, is it the teams? >> it everyone involved because think of what you just said. you talked about the rose bowl, stanford and michigan state. if you had said 15 or 10 years ago that the rose bowl with the big ten in the pack 12 or pac-10 back that was not going to be the last game, you would have been speaking heresy. but now on monday night, that florida state auburn game is going to be in the rose bowl and it's the big deal because college football is the last great frontier that we at the networks and now on the other
side of the aisle in the sports selling industry have really experienced because it's an opportunity to deal with all the different bowls on an individual basis. they have now consolidated but college football's postseason is a $600 million enterprise plus. that sounds like big money, but compare it to the nfl which is even bigger, it's just the tip of the iceberg. >> interesting. how important are the bowl games to espn in terms of the bottom line? >> it's hard to say anything is more important than monday night football, but you have these college audiences that are absolutely massive. the advertisers are very happy with these college bowls, so if i were to say what is more important, major league baseball, the nba, or in college sports, these bowl games, it's getting hard to say because when
you look at the leverage espn has to get cable carriers to pay those high fees, this is right up there in terms of the leverage they've got. it's also a great way to take advantage of the technology platforms which they are generally pushing people toward watching more games and more bowls on the espn app. it feeds into a lot of the espn profile. >> people out there say it is still confusing. who is playing who and why? is there more need for change that there's already going to be? >> i think what you have here is the fact that the five conferences that really control college football, the 65 to 70 schools in those conferences have taken hold and they have created a four-game playoff. the minute a created the four- game playoff, the next question came in how many years will ago
to eight or 16? let's calm down. you have 35 games in the postseason. you raised a great point -- if you pointed a gun to the head of anybody at espn, owning the post season from start to finish from labor day to january 6 makes college football the second most important thing there, along with the nba, behind nfl monday night football. also it is important to fox and cbs, and even the new networks at nbc. college football is the last great frontier where everyone can get involved. i think espn is leading the charge and has recognized that and that's why they spent all the money on the rose bowl first, sorry, emily, and then on the championships starting next year.
>> just rubbed salt in the wound. i can take it. i know that you negotiated some of these deals with cbs and espn. how competitive does a get? are the networks like we have to have this game? >> i go back to when i was a child in this industry. in 1980, when cbs did a whopping $9 million for the rose bowl, last year, espn extended the rose bowl for $80 million for another 10 years. it's still a three and half hour game. you may have heard about the result yesterday. the whole issue is take a look. in 30 years, it's grown ninefold and the rose bowl has always been in the center because it controlled the big ten and pac- 12.
but now it's part of the whole industry and its controlled by the 70 teams that control college football. i keep using the word control because compared to the end -- compared to the nba basketball tournament which is another monster, but that's shared by 1300 schools. the monday -- the money in college football is shared by 65 schools and if that denominator dictates the power of college football and the power to the networks and its advertisers. >> the former espn executive, and jon erlichman, stick with us. we'll talk about the nfl blackout rule after the break. ♪
>> welcome back to "bloomberg west." we are talking football. i'm joined by jon erlichman and a former espn senior vice president. i want to talk about the potential nfl blackouts. three of the playoffs games are not sold out three why is that? >> i think you look at the fact that there was such a cost and also such a demand, but the combination of our short-term numbers and the demand immediately coming up on six days notice, it's a stretch. and yes, i think you said it in the tease a couple of moments ago, the experience at home is a comfortable experience and the nfl is confronting that. the former oakland raider president was talking about how the emphasis for the nfl right now is to increase that experience at the games, to make it very attractive for people to
spend that hundreds of dollars for those tickets. that is what the push poll is, particularly on short notice when you don't know what time, saturday or sunday, and that's why you are looking at currently a lack out rule which was the subject of a legal entanglement. >> i was just speaking with the former ceo of the raiders he basically thinks is lack out rule is irrelevant. yet there is an argument for local communities to continue to have this rule in place area -- have this rule in place. and there is a risk at the game is being blacked out. what kind of costas is to the networks? >> a love it when you go into the end of the regular season and you don't know which teams
are going to make the playoffs. that boosts the ratings. but then you are left in this kind of situation were not enough people had enough time to go buy tickets because they didn't know their team is going to make it to the playoffs. this will always be a concern to the networks and for the cable companies. how often are we talking these days about the fear of people just not signing up for cable or canceling the cable? live sports is the one big reason people have to hold on to their cable package. football is certainly at the top of that list. any time you frustrate fans, that is a big deal. >> are they going to be blacked out or will they sell out in time? fax i think there will be a rush >> i think there will be a rush and this is where cbs, fox and his affiliates will all get involved in cell up and do the right thing for the local community. but the bottom line is that it's better if it is shown in the
>> you are watching "bloomberg west" where we focus on technology and the future of business. it may be sunny in san francisco but a major snow storm is bearing down on the east coast, threatening to disrupt businesses for tech companies located there. the storm has grounded already 2000 flights that could leave a foot of snow it arts of new york and new england. bitcoin has surged in value and created own cottage industry. according to wedbush securities, some companies reaped about $200 million in sales last year related to bitcoin. the companies make the chips used in a high-powered machines that mine the digital currency. samsung is hoping to diversify.
in an e-mail to employees, the chairman is urging workers to give a bigger push for innovation to move beyond hardware. samsung is the world largest smartphone and tv maker but has seen growth slowdown amidst it bite with apple. mark andreessen has rejoined twitter after more than 33 months being absent from the site. the venture capitalist at twitter investor has been tweeting up a storm in the new year, posting more than four dozen messages from engaging in question and answer sessions to more point masters where he called 2013 the best year in human history. he also posted some tweets where he ranted on education, saying if you are worried about robot eating all the jobs, maybe you should stop programming students as if they are robots. back with us is david kirkpatrick. what do you make of all of this? >> you go to the party where
your friends are. i think he's decided if he really wants to be part of the dialogue with other leaders in this is in -- business and tech and media, which he clearly does because he's a real player in those communities, he needs to be on twitter. that's the place those kinds of people read and hang out and talk to each other. >> he's talking about everything from tech to homelessness and inequality and democracy. one headline says he's going nuts so on twitter. is there any danger in being so outspoken? >> i think he's probably decided that people don't understand some key things and he would like to play more of a role in the public dialogue about and the state of the world, he has spent a lot of time in the last two days explaining how strongly he believes the world is getting better, which is a core belief of his. he is a real techno-optimist who
thinks technology is contributing tremendously to social and economic health. he has made that point are he firmly and repeatedly. i'm sure he will continue weighing in on that kind of thing with passion. he is very articulate and an extremely opinionated person that people will pay close attention to. >> it is asked waiting to see his personality shining through on twitter. on the other end of these bactrim, you have tim cook on twitter and he tweets occasionally. what is the value of executives tweeting given the potential risk that you say something wrong and the potential benefits? >> i think the risks are much smaller than the benefits for leaders who want to affect the public dialogue. especially if you want your thoughts amplified by the press.
the -- the press pays the 20 -- the press pays attention to twitter. you go to the party where your friends are. tim cook knows the people he cares about are on twitter and will respond to what he says there. same with mark andreessen. business leaders who want to contribute to the dialogue and affect the feeling and thoughts of their company and themselves will benefit tremendously from being on twitter. it is the de facto place, despite my deep passion about facebook, there's no question twitter is more where leaders talk to each other. there are a lot of reasons that is true but there's no question it's true. >> mark andreessen shares your passion about facebook. he hasn't been with mark zuckerberg from the very beginning. he has made a lot of money and is a board member. he is a twitter investor, but does this reflect at all on facebook and they be that's not where you have these kinds of
conversations? he has started similar types of dialogue on facebook as well. >> i have eaten surprised myself how hard it is for people to feel satisfied with those kinds of conversations on facebook compared to twitter. technically, you can do all the same things on facebook, but whether it's the brevity, the tradition, or some impossible to define quality of twitter, people are more responsive when you do it on twitter. he has been a happy investor in both companies and i think he has decided his influence will be sufficiently large by being on twitter and it's worth it for him. >> we will be watching to see if he can keep up the pace. >> his pace is astonishing. i love his first tweet. he said is this thing on? this is a funny first tweet. mike said he said happy new year, everyone. it has been entertaining. it would kirkpatrick, our bloomberg contributor. thank you, as always.
>> and that was then, this is now. blackberry was parting ways with alicia keys. it was just one year ago that they hired her to be as little creative director. she appeared on stage last january at the launch of blackberry 10. my guest joins me via skype from toronto. to play on one of her favorite songs, this girl just got fired? >> yes, fired, but it was merely a parting of ways. as blackberry said today, the end of a one-year collaboration which conveniently leaves the question of fired or not fired unanswered. what i think is clear is that the new ceo really has no time
for this because he's so focused on the enterprise and not the consumer. he's come in and said enough of this marketing razzle-dazzle. we are going to go back to bait back to basics and what blackberry has a fan base among, and that is people who are not impressed by alicia keys, the lawyers, bankers and government workers. >> what do you think is next for the ceo of why kerry now that alicia keys is behind him? >> he got a very interesting response when he got his first conference call. his stock was down about nine percent when they had their earnings and over the course of a one hour conference call, the stock rallied and was up at 1.16%.
i think investors have a lot more faith in him and i don't think they have a lot of faith in blackberry. i think his job is to come up with a second act from his initial performance for investors and show what he has got is going to work, and that outsourcing the risk to foxconn with the new contract they have and start to deliver on ringing customers back, big government, big business has tumors back and growing the base all over again. >> is he the one who has what it takes where so many have failed before him? >> it's tough to say. the inventor of the blackberry and founder of the company on december 24 at 5:00, just the perfect time to area the bad news, cut his stake in blackberry and half. if you take that as an
indication, the device inventor and former ceo thought now was the time to sell, but i think other investors who have already been burned have said we lost so much value, maybe he can get some of it back. we have not seen much more of a selloff beyond their response to when he sold. >> we will see what he has in store for us in 2014. thank you. did you take a trip this holiday season? if you did come you may have saved some time and money by waiting until the last minute to book your hotel. a mobile app called hotel tonight makes same-day bookings easy and affordable by connecting you it unsold inventory. they are trying to take a piece of a $15 billion same-day booking market. new year's is one of the most
popular times for last-minute heels. so how do they do? the ceo joins me now in the studio. i know you were expecting one of your biggest day ever on new year's day. that happened? >> it by far exceeded our expectations. only three people but more than we actually did trick like she would like inc. -- you might think people -- >> people get in and they say we always have great rates and prices, guaranteed low, and they get comfortable with using hotel tonight and then they can use it when they needed at the last minute. >> have you guys ever thought about somehow helping potential users know what is going to be available? for those who are too scared to wait until the last minute? i found myself in a situation where i really wanted to use you but i couldn't not plan ahead. >> that's absolutely one of the big efforts on our marketing for the year, to understand is not a
risk of using hotel tonight. we always have rooms and great inventory. we had deals and rooms at the super bowl in new orleans. they sold out quickly but we had rims and. fax can you guarantee that you will always have room? >> we always have rooms at the start of the day. most days and we have rooms all day long. some days like the super bowl, you had to be there early. on new year's day, we had rims at great prices. >> but you will never move beyond the same day? >> we are hotel tonight. we see a huge market in it and it's what we do best. it means a simple user experience and we want to stay focused on that. >> there is a big storm routing on the east coast. i understand you are preparing for business because of this. >> we are helping people out either trapped in the storm or they don't want to commute. we see some of the best prices. january in general has some of the best prices year after year as we have done this.
tonight's no exception. in new york, we see some of the lowest prices on great hotels we've ever seen. >> there is a huge controversy right now around uber and surge rising during high demand times like a storm or new year's eve. how does that work with hotels? with uber, it can lead to a rise of seven to 10 times the usual amount. >> the differences we are a pass through marketplace. the hotel sets the pricing and we give them a lot of guidance as to how they should price it but they are responsible ultimately. if they price them too high, we will show them on the app. hotels are competing against each other. there might be 100 hotels in new york driving -- trying for 15 prices. >> what do you think about the price surge approach to excess inventory? >> it makes a lot of sense from an economic standpoint. people are not necessarily comfortable paying seven or
eight times as much for a ride from point a to point the, even if it makes economic sense. there used to it for airlines or other categories of phonics, but not taxis. >> do you think uber is at risk of losing customers or trust? >> i think they have to balance the need for always having cabs available and that on-demand benefit of needing a cap now with a long-term consequences of pricing that is too high and moving too quickly and that direction. >> what is next for you guys in 2014? where is this going? are you trying to take on trip advisor or expedia? >> we are focused on taking on the big online travel agents. we are the dominant brand in best service for booking the same day hotels. we are adding more and more cities. we are going to add tons more
>> this is "bloomberg west." i'm emily chang. netflix stock soared after the popularity of their original programs. how does netflix follow that up in the new year? jon erlichman is nla with more on today's new hollywood. this is going to be a big year for spending for netflix. -- jon erlichman nla. >> this is a company with big plans. they have 40 million subscribers around the world. part of the way to get more is
more spending along the way. one of the major themes for netflix is rushing into original tv shows like "orange is the new black." that's a savvy strategy looking backwards, but as they get into the second season and look for more originals, that's not going to be that cheap. the pricing news of various pricing plans just unveiled by netflix shows they are hungry for new revenue but because of the cost, just give you an idea, they have laid out in their long-term outlook note to investors that there is about $3 billion worth of content spending that will be taking place in 2014. netflix is expanding rapidly into international markets, so marketing costs are high as they get the word out of what the service is all about. $400 million tied to technology
what has made netflix successful so far is being able to make the service easy to use and take everywhere with you. the technology investment is a part of that. >> who is the big competition for netflix westmark there's hbo, amazon, the networks in general. who are they aiming at? >> some people might like to position traditional cable versus netflix. netflix will it really position itself next to hbo. hbo has the same style of content strategy netflix is moving on. then you have hulu and amazon and the list gets pretty big. they are doing a big international expansion and there are a lot of services we talk less about in europe and latin america they are competing with. the list is really pretty long for the netflix competitors and ones to watch in 2014.
>> tank you. what about people behind the camera? what do they think about netflix's strategy? filmmaker ken burns says he likes the access to the content netflix provides but is he happy about his films being on netflix? ♪ >> my traditional platform has been for 30 years, distribution on pbs that reaches the largest number of eyeballs. every kid in america when i was growing up had memorized the entire primetime schedule. now we know we've got hundreds of choices. we can't possibly summarize and have a point on tv. i'm thrilled with the access, i'm thrilled with the idea that if i'm flying across the country and want to watch three or four
episodes of "house of cards" i can do that. we have yielded to the fact that the consumer is king. it's not the almighty network ties says you shall watch it now. this is liberating for everyone. we have been convinced, sort of, that works. everything is in flux. there's not really the model that sends us into the future with a real confidence the way we used to. now we are in a new area in whthe middlemen read the lion's share. there are too many middlemen think too much stuff on the cheap. netflix is going to make a deal with pbs and we get a large share of that because we are the most watched of the pbs shows along with "downton abby turcotte but it doesn't offset
the decline in what the dvd sales represented. this suggests there is a coming struggle. when those united artists get together as they did early on in the old hollywood system and said his is not working for us, what will happen? that will be an interesting turn of events when those folks say this is not as good for us as it's good for the people who aren't doing anything except just pressing send. >> documentary filmmaker, ken burns, talking about netflix. time now for the bwest byte, where we focus on one number that tells a whole lot. >> i have 53, as in 53 feet, which is the length of an 80 ton steel snow removal vehicle which is going to be helping to do some heavy lifting in and around new york city, getting snow off the train tracks, the long island railroad has 16 pieces of high tech moving the snow off. there is a summer shot of the beast which does the heavy lifting for those trying to make serious transportation moves in
a less sunny and environment that is the east coast right now. >> is good to know they have technology on their side. i'm feeling a bit guilty talking about this from our cushy seats in san francisco and los angeles. i deftly know people at their stay warm and they safe. if you need a room, hotel tonight, they are stocking up on inventory. >> and good tracking technology. if you go to the new york city website, you can very easily find when the snow plows are hitting your area, since you are probably leaving your car at home and it will be potentially covered in snow. >> we will continue to watch the storm as well. thank you all for watching this edition of "bloomberg west." we will see you back here tomorrow. ♪